How to Make the Business Case When Business is Down

How to Make the Business Case When Business is Down

Research shows sustainability's 'warm glow' wanes in tough economic times. How can managers respond to these changes in consumer behaviour?
John Peloza February 13, 2012
Many managers consider sustainability investments – including everything from pollution reductions to charitable donations – discretionary. In times of economic prosperity, it’s easy for managers to justify such investments.

But in times of economic downturn, like the one experienced in 2008 that’s arguably still with us today, these investments can (and maybe should?) be withdrawn. This is particularly true when the business case for sustainability rests on improved relationships with one or more stakeholder groups, as opposed to energy efficiency, cost reductions, or more easily quantified financial benefits.

Sustainability on the Chopping Block

Managers who question whether sustainability investments can improve stakeholder relationships in times of economic crisis are, in fact, on the same page as many consumers. Research shows that when the "chips are down," consumers retrench to more traditional purchasing criteria such as price and quality.  The warm glow that comes from supporting a firm that invests in sustainability takes a back seat.

Marketing communications budgets are also typically cut during recessionary times. This is a double-whammy for the business case that relies on improved stakeholder relationships: even if sustainability investments survive the axe, the funding to communicate these investments to customers is vulnerable.

So how did real managers respond to the recent recession? Todd Green (Simon Fraser University) and I examined sustainability messages in mainstream magazine advertising over a four-year period from 2006 to 2010.

We found that the proportion of sustainability messages in advertising actually went up after the recession began.  But we also found managers used the recession as an opportunity to focus their communications in two ways.

Leveraging Tough Times

First, managers “piggy backed” sustainability messages on other advertising messages focused on price, product quality, etc. It seems managers sought to use sustainability to improve relationships with customers by using existing media investments.

Second, we saw a marked shift in the basis of the sustainability message itself. Managers stopped talking about their donations to charity or other forms that create “other-oriented value” (i.e. the consumer supports the company behind the investment so someone else benefits). Instead, managers moved decidedly toward sustainability messages that create self-oriented value for customers (e.g. energy efficiency, improved health benefits from food, etc).

Our hunch: the trend towards linking sustainability messaging with customer value will become the new reality, and not just a workaround for tough times.

Additional resources

Research Insight

Firms that appear environmentally responsible experience lower stock market risk. This study offers firms a clear motivation for acting responsibly.

Tima Bansal
Research Insight

Firms with troubled CSR reputations suffer lower stock prices in a scandal than CSR-strong companies that properly disclose their misdemeanours.

Bushra Tobah
Research Insight

Nike's response to a supply chain crisis repositioned it as a sustainability leader, and raised the bar for an entire industry. 

Bushra Tobah